Union Jack Oil (LSE:UJO) dipped 11.1pc to 0.08p on Wednesday after revealing a £1.75m placing to fund its progress following highly disappointing results at its Biscathorpe prospect in Lincolnshire last month. The oversubscribed placing, carried out at 0.075p a share, will be used to advance the business’s wider activities after the drilling of its West Newton-2 conventional appraisal well has completed.

Union Jack was already fully funded for the drilling of West Newton, which is expected to begin in April on licence PEDL183. The well is targeting a gas prospect that has been assigned best estimate contingent resources of 189Bcf of gas equivalent of 31.5MMboe gross.

The operator’s NPV(10) for the gas discovery alone is $247m with a 52.5pc return on revenue. This does not include upside from an underlying oil exploration target called Cadeby Reef that has been assigned Best Estimate Prospective Resources of 79.1 million boe (gross)

The proceeds from Wednesday’s placing will fund the expected cost of any long-term gas production tests and technical or commercial studies on a field development plan at West Newton in a success case. They will also be used to implement a broader technical evaluation of other prospects at PEDL183 including additional geological and geophysical studies.

Finally, the money will cover general working capital, the progression of wider licence interest, and the proposed development cost to bring Union Jack’s 27.5pc-owned Wressle prospect into production. This final use remains in the air somewhat, with Wressle’s operator Egdon recently launching an appeal against North Lincolnshire Council’s refusal of its development plans for the prospect.

Delays at Wressle have become a source of frustration for everyone involved, and the latest refusal comes despite Egdon receiving a recommendation for approval from North Lincolnshire Council’s planning officer. However, Union Jack’s exec chairman David Bramhill maintains that Egdon’s enhanced proposals for Wressle address the reasons highlighted by the planning inspector in his dismissal of initial appeals in January 2018.

If Egdon and Union Jack do get lucky this time around, then it will provide both firms with a nice boost – pre-drill gross mean Prospective Resources at Wressle as calculated by Egdon are estimated to be 2.1MMbbls oil.

On Wednesday’s placing, Bramhill added: ‘This Fundraising will place the Company in a strong position to deliver growth in reserves, production and asset value, while adhering to our principles of strict financial and technical discipline and further success at either West Newton or Wressle will offer significant value upside and generate substantial future revenues for Union Jack following their development. We look forward to updating the market of developments at West Newton and Wressle, and on the Company’s wider portfolio, over the coming months.’

This latest injection of cash comes just weeks after a well at Union Jack’s 22pc owned Biscathorpe prospect failed to deliver, prompting a crash in the firm’s share price. The well was targeting a mean prospective resource around 14MMbbls oil with a 40pc chance of success. In a success case, it would have been worth around £24m net to Union Jack, which Bramhill had previously described as potentially ‘transformational’ for the organisation.

However, this was not to be, with preliminary analysis at the well indicating that its primary objective – the Basal Westphalian Sandstone – was poorly developed. Indeed, it was not thickened at the location as expected in the pre-drill model, with the indication being that the sandstone could be more thickly extended to the north and north-east. As such, Egdon has still not tested the Biscathorpe play properly.

As we said last month, there is no guarantee of success at either West Newton or Wressle. Indeed, past troubles at Wressle suggest the very opposite. However, if you were already interested and saw the market’s ‘en-masse’ exit from the firm following Biscathorpe as an over-reaction, then there could remain plenty to get excited about. With shares falling even further on Wednesday’s raise, the firm could soon end up looking rather cheap.

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Daniel Flynn does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

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The S&P500 has reached new highs again. It’s likely to run on to tackle the 3000 milestone level shortly, where the chart suggests strong headwinds lie. But during the past decade bull run, (assuming we’re still in one) investors have seen this scenario play out positively before - where a big move upward followed with gusto, despite seeming unlikely. Will the third time be so lucky?

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